Warner’s Jon Platt adds to criticism of US consent decree review

Warner/Chappell’s Jon Platt is the latest senior music publishing executive in America to hit out at the news that the US Department Of Justice has decided not to make any amendments to the consent decrees that regulate collecting societies ASCAP and BMI, but instead has formally stated that the consent decrees as they currently stand oblige the two performing rights organisations to operate a 100% licensing system.

As previously reported, the US publishers had called for various changes to be made to the consent decrees, arguing that the collective licensing rules are outdated in the digital age. A key change the big publishers were pushing for was the flexibility to withdraw their digital rights from the collective licensing system while continuing to license conventional broadcasters, live performance, clubs and bars through the societies. The US rate courts have previously ruled that this isn’t possible under the current wording of the consent decrees.

The DoJ declined to make that and other changes, but instead concurred with the opinion put forward by various licensees about 100% licensing. This is the principle that says that a licensee with a BMI licence – say – can make use of all and any songs in that society’s repertoire, even where songs were actually co-written with songwriters represented by other American PROs like ASCAP, SESAC or GMR. Previously publishers and the societies were of the opinion that, with co-owned works, a licensee would need a licence for all the societies representing songwriters with a stake in any one song.

In an open letter to the songwriting community, Platt writes: “As you may be aware, for the last two years, ASCAP and BMI have been in discussions with US Department of Justice regarding the decades-old consent decrees that govern ASCAP and BMI’s licensing practices. The objective was to have the consent decrees amended and updated in order to make them more responsive to today’s fast-moving, and increasingly digital, music business. However, in a hugely disappointing decision, the DoJ has declined to implement any of the changes requested by ASCAP and BMI”.

“But what’s more, the DoJ has determined that the consent decrees require ASCAP and BMI to license their repertoire on a 100% basis. This means that any licensee would be able to obtain a license for 100% of any song from ASCAP or from BMI, even if that society only controls a small portion of the song. This determination is completely inconsistent with the manner in which ASCAP and BMI have issued public performance licences and threatens to undermine the very system by which songwriters have, for many years, been compensated for the public performance of their songs”.

He goes on: “It is especially alarming that the DoJ has come to this determination despite the overwhelming concerns expressed by ASCAP, BMI, the National Music Publishers Association, publishers, songwriters and even the US Copyright Office. In January, the Copyright Office advised that: ‘Such an approach would seemingly vitiate important principles of copyright law, interfere with creative collaborations among songwriters, negate private contracts, and impermissibly expand the reach of the consent decrees'”.

He concludes: “Our loyalty – first and foremost – is always to you, our songwriters. Our understanding is that, because there are so many unanswered questions and implementation challenges, the DoJ is providing a one-year grace period for the industry to adapt to the DoJ’s new interpretation of the consent decrees. We are and will be working on your behalf, independently and with ASCAP, BMI and NMPA, to explore all available strategies to preserve and grow your public performance revenue in the face of the DoJ’s unfortunate determination”.

The chiefs of all three major music publishers have now hit out at the DoJ’s decision on the consent decrees. Last week Sony/ATV boss Marty Bandier told reporters: “We are incredibly disappointed by the unjust way the Department has decided to interpret the consent decrees. Its decision is going to cause a tremendous amount of uncertainty and chaos in a market place that has worked well for years and will adversely impact everyone in the licensing process, including PROs, licensees, music publishers and most of all songwriters who can ill afford to hire lawyers to figure out their rights under this inexplicable ruling. The decision raises more questions than answers”.

Meanwhile Jody Gerson at Universal Music Publishing told staff in an internal email that she “believes that the DoJ’s decision is bad for songwriters, and we are deeply disappointed”. She added that enforced 100% licensing would lead to unfair pricing while also providing a “disincentive to songwriters to work with fellow writers who are signed with a different PRO”.

So far so united. Though many of those on the licensee side of the equation are quietly welcoming the DoJ’s rulings. Speaking to CMU last week, entertainment lawyer Paul M Fakler at Arent Fox LLP, who has represented various broadcasters over the years, argued that the decision to not amend the consent decrees to allow the withdrawal of digital rights was the right decision.

Says Fakler: “The only reason the publishers wanted [partial withdrawal] was so they could keep the benefits they get from using the PROs for certain types of licensing, while discriminating against certain types of licensees – ie digital music services – by forcing those services to license without the protection of the rate courts or other protections of the consent decrees. All of the licensees that submitted comments – including those who would not be directly affected – agreed that this would have been a terrible idea”.

On the 100% licensing point, the legal man argues that the DoJ hasn’t actually introduced a radical new policy, but instead has confirmed an interpretation of the consent decrees long held by the broadcasting sector. He said: “As various licensees demonstrated in their submissions on this issue, the language of the consent decrees, the language of the licences granted by the PROs, the PROs’ agreements with songwriters and music publishers, and the PROs’ internal operating documents all provide for [100%] licensing”.

Since last week’s news on the DoJ’s decision, there has been some debate as to whether or not the ruling is good or bad news for the two smaller US collecting societies SESAC and GMR, which are not subject to consent decrees. The lack of reform of the BMI and ASCAP regulations might make joining the smaller societies more attractive for some songwriters, though the enforcement of 100% licensing would mean that – on any co-writes with writers who remain in BMI and ASCAP – creators may not actually enjoy all of the benefits of joining SESAC or GMR.

Though Fakler reckons that if too many songwriters do jump to the smaller societies to circumvent the consent decrees and the rate courts the regulations empower, then there would be case for regulating those other societies too. “It is only a matter of time before SESAC will be subject to some form of rate court”, he reckons. “SESAC recently lost two major rulings in private anti-trust cases, but avoided any permanent remedy by settling. Eventually, it should be regulated the same way ASCAP and BMI are”.

“The jury is still out on GMR”, he adds, of America’s newest collecting society. “The number of songs it controls 100% seems to be very small. To the extent that it develops a ‘must have’ repertory, however, that would simply argue for rate court supervision. Because one of the big takeaways from this review process is that, contrary to the publishers’ constant claims, the consent decrees still serve a vital function”.

The DoJ’s decisions on the consent decree review are not yet final. BMI and ASCAP could as yet fight them, and the whole matter has to be approved by the aforementioned rate courts, which might provide another opportunity for the publishers to present their arguments. Though Fakler’s comments demonstrate that there is a strong sentiment amongst broadcasters and other licensees that the DoJ has actually reached the right conclusions here, and the music industry will have to tackle those groups in any fight back.